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India: Testing the takeover code

Indian companies lack predatory instincts. But in March they discovered a mean streak. A rash of hostile takeover bids - the worst in India - has perked up a dull stock market. These events will, in the coming weeks, test the new takeover code put in place by the Securities Exchange Board of India (SEBI) in February even as the code itself is being challenged in Indian courts.

Says SEBI chairman DR Mehta: "The new takeover rules have put a transparent mechanism in place. We want to administer them in as minimal a manner as possible."

As hostile activity picks up, his resolve is likely to be severely tested. In mid-February, cable company Sterlite startled the stock market by making an open offer to buy a 10% stake in Indian Aluminium (Indal), a 60-year-old company whose core shareholder is Canadian company Alcan.

Even as a bemused market and excited press puzzled over whether this was a hostile bid or not, Sterlite, on SEBI's directions, doubled its offer to 20% (the regulations require that the minimum public offer must be for 20%). Alcan spurned Sterlite's offer of partnership, put in a higher bid of Rs105 ($2.60)

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